Trump budget plan increases, extends Fannie, Freddie guarantee fees

by Francis Monfort14 Feb 2018

While the spending plan proposed by the Trump administration to Congress is unlikely to be implemented, the requested increase in the guarantee fees charged by Fannie Mae and Freddie Mac shows how officials view the future of the GSEs and the entire housing-finance system, according to a Bloomberg report.

In its 2019 budget proposal, the administration is seeking a 0.1-percentage-point increase in the fees charged by Fannie and Freddie to back payments on mortgage-backed securities. The administration said an increase would result in a $25.7 billion reduction in the federal budget deficit through the next decade.

The guarantee fees charged by the GSEs and paid by borrowers were already raised by a 0.1 percentage point during the recession to help pay for a payroll tax cut. The increase is scheduled to expire in 2021. Under President Donald Trump’s 2019 plan, the fees would instead be raised to 0.2 percentage point and the increase extended through 2023. Additionally, the budget would have the GSEs stop allocating money to trust funds that support affordable housing.

The administration believes an increase in those fees would work to level the playing field for private lenders, according to the Bloomberg report, citing a budget document released Monday. Although approval of the proposal is uncertain, the request points to the administration’s vision of reducing the government footprint in the mortgage market and potentially scaling back on expenses for affordable housing.

Still, the administration said in the budget that it wants to work with Congress on reforming housing finance, adding that any reform would alter its projections.


Related stories:
Fannie Mae launches $100 million low-income housing tax credit fund
Freddie sees 2 years of housing growth unless this happens
 

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